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Council of Academic Advisers Paul W. McCracken, Chairman, Edmund Ezm Day University Professor of Busi­ ness Administration, University of Michigan Kenneth W. Dam, Harold ]. and Marion F. Green Professor of Law, University of Chicago Law School Milton Friedman, Senior Research Fellow, The Hoover Institution on War, Revo­ lution and Peace; Nobel Laureate in Economic Science Donald C. Hellmann, Professor of Political Science and International Studies, University of Washington D. Gale Johnson, Eliakim Hastings Moore Distinguished Service Professor of Economics and Provost, University of Chicago Robert A. Nisbet, Resident Scholar, American Enterprise Institute G. Warren Nutter, Paul Goodloe Mcintire Professor of Economics, University of Virginia Marina v. N. Whitman, Distinguished Public Service Professor of Economics, Uni­ versity of Pittsburgh James Q. Wilson, Henry Lee Shattuck Professor of Government,Harvard University

Executive Committee Herman J. Schmidt, Chairman of the Board Richard J. Farrell William J. Baroody, Jr., President Richard B. Madden Charles T. Fisher III, Treasurer Richard D. Wood

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Program Directors Periodicals Russell Chapin, Legislative Analyses AEI Defense Review, Robert A. Goldwin, Seminar Programs Robert J. Pranger, Editor Robert B. Helms, Health Policy Studies AEI Economist, Herbert Stein, Thomas F. Johnson, Economic Policy Studies Editor Public Opinion, Marvin H. Kosters/James C. Miller III, Seymour Martin Government Regulation Studies Lipset, Ben J. Wattenberg, Co­ Editors; David R. Gergen, W. S. Moore, Legal Policy Studies Managing Editor Rudolph G. Penner, Tax Policy Studies Regulation, Anne Brunsdale, Howard R. Penniman/ Austin Ranney, Editor Political and Social Proce'sses J. Robert Pranger, Foreign and Defense William J. Baroody, Sr., Policy Studies Counsellor and Chairman, Laurence H. Silberman, Special Projects Development Committee A Conversadonwith John Connally of Texas

A Conversationwith John Connally of Texas

Held on September 18, 1978 at theAmerican Enterprise Institutefor Public PolicyResearch Washington,D.C. ISBN 0-8447-3332-6 Library of Congress Catalog Card No. 78-24654 AEI Studies 230 © 1978 by American Enterprise Institute for Public Policy Research, Washington, D.C. Permission to quote from or to reproduce materials in this publication is granted when due acknowledgment is made. The views expressed in the publications of the American Enterprise Institute are those of the authors and do not necessarily reflectthe views of the staff, advisory panels, officers,or trustees of AEI. "American Enterprise Institute" is the registered service mark of the American Enterprise Institute for Public Policy Research. Printed in the United States of America Introduction

The American Enterprise Institute for Public Policy Research is a nonprofit, nonpartisan educational and research organization devoted to improving the quality of discourse and deliberation on matters of public policy through the competition of ideas. Now, most of those who speak or write under the auspices provided by AEI-as, for in­ stance, Governor John Connally in this conversation-do take posi­ tions and do express partisan views, often very emphatically; but when they do so, they speak for themselves. AEI, itself, takes no position on public policy issues. As part of the usual preparation for an event such as this, I asked my secretary to find out how our guest prefers to be addressed and referred to-that is, Governor Connally, or Mr. Secretary-and the answer was to call him Mr. Connally and to refer to him as John Connally of Texas. We are fortunate to live in an informal nation. In a more formal one where titles are really taken seriously, Mr. Con­ nally would be referred to as Mr. Secretary, Governor, Governor, Governor, Secretary John Connally. And that would not inform us of all the things he has done. In addition to serving as secretary of the navy, as secretary of the Treasury, and as governor of Texas for three terms, he has been, first, at age twenty-two, secretary to the then Congressman Lyndon B. Johnson; a frequently decorated naval officer; a member of the bar; active in a management role in broadcasting, real estate, oil and gas, ranching, manufacturing, and railroading; and twice appointed to the Foreign Intelligence Advisory Board. He also serves as a board director of such varied enterprises as Nickel Mining, the Greyhound Corporation, and that great Texas institution, Dr. Pepper. In short, few, if any, in this nation can rival Mr. Connally in

1 the breadth and variety of his experience in great enterprises, both public and private, domestic and foreign, and at the highest levels of responsibility. Now, a few words about this conversation. We asked the partici­ pants not to think of themselves as passive members of an audience of listeners. After Mr. Connally's brief presentation, they were ex­ pected to join actively in a conversation with him and with each other, not just in asking questions but rather in arguing, probing, discussing, analyzing, agreeing, and disagreeing. Those invited were carefully chosen for this purpose. The ultimate aim of AEI is inquiry, because it is an educational and research organization, and so we asked all present to join in this effort to search for new questions, new thoughts, new understandings. Members of the press were told this session was not "off the record," but they were also asked not to use it as a news conference. We think we offeredsomething better, certainly different, what might be called a "no news" conference. We hoped the press would get from this session what we hoped everyone would get: a chance to discuss with Mr. Connally his views on important matters of public concern, to find out what he thinks is important, and to indicate to him where he seems to be ·right or wrong.

RoBERT A. GoLDWIN Director of Seminar Programs American Enterprise Institute

2 A Conversation with John Connally of Texas

At the outset, since I have at times been critical of the Carter admin­ istration, with respect to both its foreign policy and its domestic policy, I should express my heartiest congratulations to the President and express my deep satisfaction with the progress made at the sum­ mit with Prime Minister Begin and President Sadat. Frankly, it ex­ ceeded my fondest expectations of what they might achieve. Much remains to be done, much is tentative, much is conditioned on subse­ quent actions by others. Nevertheless, it seems to me that they made very substantial progress. The President is entitled to extremely high marks for the perseverance he showed and the patience that w�s obviously manifest in the conduct of those negotiations. Having said that, I mean not to be critical but rather to recount my concern in several fields. First, I am disturbed by what is happening around the world on the economic front. Here at home we are seeing inflation that is dis­ turbing indeed. It is now a matter of deepest concern to most Ameri­ cans. I would say it is the number one issue in the minds of most people in this country today. It is accompanied by a high level of federal spending and a high level of taxation, bothof which are of con­ cernto Americans today. In the international field, we continue to see a deterioration of the economic competitiveness of American goods and services. Last year, as you all know, we ran a deficit of $26.7 billion in the trade account and in excess of $15 billion in the current account. It appears that this year will be as bad, if not worse-in the range of $25-30 billion in the trade account and something in the range of $15-16 billion in thecurrent account. We tend to explain it in terms of the cost of energy, but I regard that as an insufficient explanation. We spent almost $45 billion for

3 energy last year, but it is not fair to say that this is the entire reason for our problems. On a bilateral basis, our principal deficit is with Japan. We bought no energy from Japan. Germany is also one of the surplus countries against the United States, and so is Switzerland. We bought no energy from either of them. We cannot realistically say that energy is the cause of the deficit in our balance of payments or in the current account, or that the cost of energy is the cause of the deteriorating value of the dollar. These things reflect a lack of confidence in our ability to manage our fiscal affairs and to deal competitively in the world markets. I don't know any other way to explain them. These concerns were brought home to me in my recent trips to Brazil and Argentina and, more recently, to Germany and southern Africa. In the foreign policy pronouncements of the United States, the doctrine of human rights has been used to implement foreign policy. In all fairness, we must applaud the President-as I have done in speeches all over this country-for enunciating a policy of human rights. I have said repeatedly, and I repeat again today, that I think any American should be proud that one of the basic articles of faith of this American society is the commitment to human rights and individual liberty and human freedoms. If we mean anything to the world, it seems to me, the United States should stand as an ideal for human rights and human freedoms. None of us could reasonably have any argument with that kind of a commitment of this nation. But when it is applied selectively, basically as a weapon against our friends around the world in what has to be a double standard, then I think it calls into question the wisdom of trying to transpose a worthy and noble article of faith into a political weapon. In Brazil, for instance, in visits to that country and in meetings with its dissidents, we have made it clear that we disapprove of their form of government. We talk about human rights in terms of rule by a majority and one man-one vote. We have also been extremely critical of the military regime in Argentina. The consequences have beeh extremely costly to the economic well-being of this country. We have seen business that normally would come to the United States-contracts for sophisticated technology that would go to all types of U.S. companies-go instead to Germany, to Japan, to Swit­ zerland, to other countries around the world. The doctrine has been extremely costly to us in economic terms-for example, with respect to the turbines for two great river projects between Brazil and Uruguay and Argentina. This is not to say that we should not pay an economic price for

4 things in which we believe. In the final analysis, there has to be a price for everything, and our commitment to beliefs is worth almost any price. The question is whether or not we are accomplishing the purpose for which the pronouncements are made-How can we bring about desired change? This leads us to consideration of the foreign policy of this coun­ try in the southern tip of Africa, in South West Africa, in South Africa, and in Rhodesia. I don't pose as an expert in any one of those countries-far from it. I am concerned, though, by what I see happen­ ing there and the reason for its happening. I had the pleasure of visiting South West Africa two or three weeks ago. I spent only a couple of days there, but in the time that I had, I was impressed with the movement under way to bring inde­ pendence and self-determination to South West Africa. The day before I got there, the United Nations task force left, after having been there for a couple of weeks. I had the pleasure of going to the Angolan border and talking to some of the leaders of the Avamba tribe, as well as meeting in Windhoek with Justice Steyn and the leaders of all of the principal parties in South West Africa. They said that they had made preparations for an election-before December 31, they hope-to bring about what they thought to be our express desire that South West Africa have independence, that it have majority rule, and thatit have one man-one vote. They are concerned because they did not know what the United Nations recommendations would be. They clearly had some doubts that the United Nations would be satisfied with the registration that had already occurred in the country pursuant to their desires to have elections by December 31. They have registered approximately 80 percent of what they assume to be the total eligible voters in the country. I was struck by the good faith I thought South Africa showed in bringing about these changes. They have empowered Justice Steyn with rather remarkable powers to prepare South West Africa for its independence. They have given him power to enact laws, to repeal laws, and to override parliamentary statutes. I think he has remarkable leeway in what he can do and how he can do it, and I was struck by his determination to bring about the desired changes. I know of nothing to equal it, except, perhaps, MacArthur's power in Japan right after World War II. Obviously the competing force is Sam Njomo, who is leading the Swapo forces based in Angola. He asserts that he, indeed, speaks for the Avambu tribe. The chief of the Avambu tribe told me person­ ally that if Mr. Njomo thought he spoke for the tribe, that he should lay down his arms, leave Angola, come into South West Africa, and

5 engage in the campaign. They would be delighted to contest him for control of the votes of the tribe. Recently, the United Nations has indicated that it proposes to send in 7,500 troops and delay the elections until April or May of next year. This, I think, would be disconcerting to the South West Africans, to all of those who have in good faith tried to bring about the changes that they thought we and ·the United Nations wanted. I would like some insight as to why it is necessary to send in that many troops and to delay the elections. Moving from there very quickly, I want to touch on Rhodesia very simply, because again I am no expert. I did not see everyone in Rhodesia that I would have liked to see-certainly not everyone involved in the future of that country. I did see Mr. Ian Smith, the prime minister, and I saw most of the cabinet members. I met sepa­ rately with Reverend Musorewa and Reverend Sithole. I met with Senator Chief Jeremiah Chirau, and I met with most of the black cabinet ministers. From the standpoint of those involved in the in­ ternal settlement, I got some indication of their depth of feeling. I was struck by not only the frustration, but also the irritation and anger that they feel toward the United States. The blacks-not the whites-told me in Rhodesia that the secretary of state of the United States came to see them in September 1976 and told them that if, by any means, they could evolve a system to provide for majority rule, particularly through a one man-one vote concept, then the United States, the United Kingdom, and the world would applaud and sup­ port them. For thirteen years, the British had tried to bring about some changes, and the United States had tried to bring about some changes, both unsuccessfully. Then on March 3, 1978, the blacks themselves, meeting with Ian Smith and the white government, reached the Salisbury accords, which provided for majority rule and one man-one vote. Now, they say, they do not receive any applause, or approbation, or support. They continue to be discriminated against and harassed by the United States and the United Kingdom, while the opposition receives our support. They told me it makes no sense to them that we support Joshua Nkomo, who is in Zambia, and Robert Mugabe, a self­ confessed Marxist who is in Mozambique. They asked why we are supporting the very murderers and terrorists that the Soviets are arming. I asked what reason they had been given, and they said they had been given two reasons why the United States adopts the policy it does. First, Ambassador Andrew Young has told them, directly and indirectly, that the United States always seems to be on the side of

6 the loser. Others in the State Department have also said that this time they think the terrorists and the revolutionaries will win, and they want to be on the side of the winner. The other reason offered for our policy was that the United States has embraced President Obasanjo in Nigeria, from whom we buy 2 million barrels of oil a day. The State Department has made it clear that whatever settlement is reached in Rhodesia will have to be satisfactory to the government of Nigeria, because that is where our economic interest is. My only answer was that I could not say that these are or are not our reasons. I would hope that we have not reached the point in our foreign policy where, on the one hand, we express the belief of every freedom-loving people in the world in the propagation of human rights, and, on the other hand, say to a people, who have done basically what we asked them to do, that we cannot support them because we have to be on the side of the winner. Indeed, I would appreciate any insight into other reasons why we have, in effect, rejected the policies of 1976. If we did indeed tell them what a number of them said we did, we have reneged. We should offer some explanation of the policies we are following and some justification for the support in the councils of the world of the very people the Soviets are arming. One of them, Mugabe, is a Marxist, and another, Joshua Nkomo, says that if indeed he gets control of the country, it will be a one man-one party country, and it will be used as a base of terrorism against South Africa and any similar country in that part of Africa. It seems to me it goes to the very heart of the foreign policy of this country whether or not we are being a bit hypocritical in what we do as compared to what we say. As a result, I think we have lost credibility throughout the world. I don't think there is any question about that. We no longer have the confidence, the prestige, or the influence that we have had in recent times.

Qyestions and Answers THEODORE BARREAUX, American Institute of Certified Public Account­ ants: Since foreign policy is the natural preserve of the presidency, that leads me into a domestic political question, which relates to the political ambitions or program you might have. In preparation for this meeting, I made some calls to Republican party officials, past and

7 present, in Oklahoma, South Carolina, New York, Minnesota, and California. [Laughter.] This is a very unscientific poll, but nonetheless a good cross­ section of ideological commitment, and included such people as a for­ mer Republican state chairman in New York, a founder of the Ripon Society, a couple of senators, a congressman, and others. All of these people were delegates to various national conventions. The recurring theme I heard that was really fascinating was that John Connally is the most qualified man in America today to be president. Across the spectrum, they all stated that as an absolute belief. In conjunction with that, they also said they thought you were one of the best campaigners, and that you would be a terrific candidate. The significant area of concern they all had is that you may really still be a Democrat, and that a John Connally administration would be inhabited by, as one of the senators told me, a warmed-over Lyndon Johnson White House, with such people as George Christian, George Reedy, and a whole list of other folks. [Laughter.] The two questions this leads me to are: What is your own perception of your political strengths and weaknesses, particularly in the Republican party, in terms of a possible nomination; and, sec­ ondly, who are the people you rely on for advice and counsel? What would a John Connally administration look like?

MR. CONNALLY: Well, I'm not sure I have any. I try not to think about how I am perceived in the Republican party. I'm sure there are many who look upon me as an upstart and a johnny-come-lately, and that's understandable. I'm sure that there are many who would be suspi­ cious that it might be, as you say, a warmed-over staff of the George Christians and George Reedys. I'm sure it would take a team of mules to get either of them back to the White House, and you know it wouldn't be bad to have the likes of a George Christian back, as press secretary. You might run a little survey with the various press corps. The truth of the matter is that I left my old party, or it left me, for what I thought were good philosophical reasons. It had nothing to do with politics. Anybody in his right mind would know that, if I were to do it on the basis of opportunism, I certainly wouldn't do it at the lowest point in the history of the Republican party in this century. And I chose that time deliberately; it was not by accident. I did it deliberately so that people wouldn't say I was just an opportunist. But people say whatever they like. My answer to your question is that, if I should be elected to office, obviously it will be a Republican administration, not a Demo­ cratic administration.

8 And, finally, I would simply say that I thank you for your survey. And maybe some day qualifications will have something to do with who is president. [Laughter and applause.]

MICHAEL BALZANO, American Enterprise Institute: With respect to South Africa, it has been said that European NATO countries rely for defense very heavily on the strategic materials that come out of that country. Could you comment on the importance of the materials coming out of South Africa with respect to the ability of European NATO countries to defend themselves?

MR. CONNALLY: Frankly, Mr. Balzano, I'm not in a position to do that in any great depth. I don't know precisely what NATO gets from them. I do know that the southern tip of Africa is the principal source of diamond gemstones as well as industrial diamonds in the world. The two principal sources are the southern tip of Africa and the Soviet Union. Chrome is found primarily in Rhodesia, as well as in South Africa. The Soviet Union and southern Africa are the two principal sources for the industrial world, which certainly includes the countries of NA TO. Uranium is found in enormous quantities in southern Africa, and there are a number of other very strategic materials, but I, frankly, am not in a position to give a complete rundown of them.

BoB SHOGAN, Los Angeles Times: I wanted to return to the beginning of your comments in which you referred, first, to the Camp David summit outcome and then to the international econoinic situation and the lack of confidence in U.S. ability to handle its affairs. Although these things are not directly related, sir, do you see a connection in that there can be a favorable fallout for the President and for the administration from this apparent achievement at Camp David, as­ suming that things go according to plan? In other words, do you think that one thing can lead to another and that there can be a positive momentum in terms of the regard and respect with which he is held in economic and financial quarters in this country and abroad?

MR. CONNALLY: Yes, I think it can. I think it can give him confidence and courage. I think it will be reflected in more than just the foreign policy field. It will help his popularity tremendously. It will not last unless he moves in the econoinic field as well, but he can do that. He has it within his power to reconstitute himself, in a sense, and to regain

9 popularity to an amazing degree just by a series of actions which I think are not difficult to take. With the success of this foreign policy move, perhaps he will do the same on the economic front.

MR. SHOGAN: Do you think that there might be an analogy between the Camp David summit and President Nixon's initiative toward China, which came at a relatively low point in his political fortunes and seemed to tum a lot of things around?

MR. CONNALLY: The President will receive accolades from all over the world, as well as from here at home, for the next several months. I don't know how these various agreements will be taken. I suspect that President Sadat is in a fairly vulnerable position. I don't know whether or not the Arab world will support him, and I think that may be the key factor. What happens in the future will determine ulti­ mately whether or not this summit was a success and whether or not it will really be what we hope it can be. Prime Minister Begin can persuade his people. He had Dayan and Weizman with him. In my judgment, he had enough power with him to persuade his own people that, indeed, he did not give up too much. Going in, President Sadat had two positions that appeared fairly non-negotiable-and, again, this was just my own evaluation of it. First, he had to maintain very strongly that the Israelis had to with­ draw from the conquered territories, which is called for, at least in the Arab world, in terms of Resolution 242. Second, he had to insist on the creation of a Palestinian state. These were basically non­ negotiable positions. Now, I don't know how these two agreements will be interpreted, or how the people will react to them in terms of these positions. It may well be that Sadat received a feeling of support from others by telephone calls and by other means at Camp David. We will just have to wait and see what happens.

JIM WraGHART, New York Daily News: There was a time in the Nixon administration when inflation was about as serious a problem as it is today, and, at that time, President Nixon went the route of wage and price controls. If my recollection is accurate, you were a principal advocate of that route. As you know now, President Carter and his economic advisers will have to decide what to do. While no one in the administration, as far· as I know, is advocating wage and price controls, there are some outside the administration who are advocating this. I would like to have you address the policy that you advocated, how effective it was at that time, and what your reasons for it were.

10 Then perhaps you would relate it to today and tell us whether it is the route to go, as far as you can see it.

MR. CONNALLY: I would like to make several observations. First, in my judgment, wage and price controls will not work, never have worked, and never will work over any protracted period of time. They should be applied only in case of war or an emergency. Why did we use them in 1971? Because the President was taking a sweeping move. As you well know, we were faced with a volatility in our trade patterns and in the currency markets of the world. We had been plagued with it since May of that year, 1971. It was obvious that the fixed exchange rates were not going to hold. It was obvious that we were getting on more and more dangerous ground. As a result of the action proclaimed by the President on August 16, we closed the gold window for the first time. We put a 10 percent surcharge on all imported products into the United States because of the twenty-two years of uninterrupted defi­ cits in our trade account. At that time, we also put a ninety-day freeze on wages and prices in the country, because we were afraid we were taking steps that might engender doubts and fears and panic in the world. As a matter of fact, a number of people counseled the President that the inevitable result of his action would be a worldwide recession or depression, even worse than the 1930s. None of us was sure. We did not know what the impact would be. As far as I am concerned, the primary motivation for wage and price controls and the ninety­ day freeze was to give this country, as well as the rest of the world, time to think and reflect and to stabilize. None of us thought that wage and price controls were the road to utopia. All of the President's economic advisers-I think right­ fully-counseled him that controls were the easiest thing in the world to get into, the most difficult to administer, and almost impossible to get out of. I would hope that President Carter's advisers will give him that kind of advice. Controls can work for a while, but the longer they are kept, the greater the inequities that inevitably build up in a complex society such as ours. Inevitably they result in an eruption that is worse than the situation that prompted them.

MR. WIEGHART: Two questions in connection with that. First, in retro­ spect, was it a mistake on your part to take that route? And, second, your explanation included some of the very factors present today. There is a degree of turmoil in world currency markets today, and

11 we have floating exchange rates. Do you think we should go back to thefixed exchange rates, which were failing then?

MR. CONNALLY: If I had had the wisdom of hindsight, I probably would have recommended against wage and price controls. To answer your question, yes, the wage and price controls imposed in 1971 were a mistake.

MR. WIEGHART: Are some of the same factors present today that were present then?

MR. CONNALLY: Some, but not to the same extent. We have had the floating exchange rates, and they are floating, so no one is worked up about them. Obviously, the dollar is deteriorating, but the prob­ lem today is not in the exchange rate. If we went back to fixed exchange rates, they would not last, because we live in a world of protectionism and closed markets. I am no economist, and I see some distinguished economists here, so I am at a terrible disadvantage in trying to give economic advice in the presence of experts. But I will simply say, as a layman, that there is nothing mystical or magic about the dollar itself. It is merely a reflection of the foundation and the stability of the economic system it serves. Our problem is not with the dollar; our problem is with the economy. Since we are not doing many of the things we should be doing in this economy, I would not recommend wage and price controls at the moment. Our problem is to persuade other nations of the world to lower their barriers, their tariffs, their restrictions, and to permit American goods and services to enter. That's our problem. In the last twelve months, there has been a devaluation of the dollar-I guess it has fallen 32 percent against the yen, 33 percent against the Swiss franc, and 17 percent against the D-mark. That doesn't help us. Theoretically, devaluation is supposed to equalize our trade, but it doesn't equalize anything if we can't get our prod­ ucts into their markets. That's our problem.

JoHN MAsHEK, U.S. News & World Report: It appears that your friend Bob Strauss is going to advise the President to go t-0 a Phase II in the next couple of weeks, though the administration doesn't like to call it that because it indicates another phase is coming after that. It will probably consist of voluntary guidelines or standards (of 7 percent on salary raises and S-S:t/2 percent on prices). Would that work?

12 And what would you advise? Should we go into some new phase of voluntary restraints, hoping that will work?

MR. CONNALLY: I would certainly try that, but to make them work, the federal government has to make up its mind to reduce spending. If the President really wanted to correct a number of our problems at the same time, he would recommend a substantial tax reduction in this country in the range of $25 billion. Part of that $25 billion should be a rollback of the capital gains tax to the pre-1969 level, back to 25 percent. The President says that would be giving it to the rich, but I don't believe that. I think that would be the very heart of a program of encouraging savings and investments in this country. We need to modernize plants and create jobs. I think he ought to announce a cutback of 5 percent spending at the federal level immediately, and try to enforce it. I don't know of a department or agency that couldn't stand a 5 percent cut. That would save him $25 billion, which would be the amount of the tax cut, so he would have no bigger deficits than he has. Then, he ought to say to our trading partners around the world that we will continue our open trade policy-we believe in free trade, but we also believe in fair trade. By June 30, 1979, the beginning of the next fiscal year, the United States should insist that its trade account and its current account be in basic equilibrium, and that we will not continue to suffer such large deficits. If he just did those things, I think we would see a restoration of confidence. The world would more readily believe that he is pre­ pared to deal with the fiscal problems of this country if he reduced federal spending, reduced taxes, and encouraged investments, in order to create new jobs and new plant facilities and encourage ex­ pansion. We should insist that American goods and services not be penalized in the marketplaces of the world. Those would be the steps I would recommend to him.

ROBERT N1sBET, American Enterprise Institute: You mentioned the competitive difficulties that the United States has encountered with respect to West Germany and Japan. Those, by any reasonable defi­ nition, are free countries. But there is an altogether different rela­ tionship, as we know, between central government and industry, especially big industry, in those countries. My question is this: Do you think that the United States can retain what is left of a private sector and still be able to compete effectively against a West Germany and a Japan, where the government so often eases or assuages the problems that arise in their industry?

13 MR. CONNALLY: Mr. Nisbet, I think we have to work at it if we are going to do it. It is not just going to happen accidentally. I think the political leadership of this country has to be mature enough and courageous enough to take those steps that encourage and provide the incentives for the basic industries to compete. Polit­ ically, this is not an easy thing to do. We are having difficulty com­ peting in steel, for instance, partly because we helped Germany and Japan build the most modern steel mills in the world with our money and our technology and our know-how. But we have discouraged the steel industry at home. We have looked on it as "big business," as an evil, without understanding what part it plays in the economic system. We have to be mature enough to recognize that this, the largest, the most powerful of all economic nations in the free world, cannot exist without a basic steel industry, or aluminum industry, or any of the basic metals. We have to have them. We have to have that degree of self-sufficiency, just as we have to be more self­ sufficient in energy. This may mean that we give encouragement, that we provide some incentives. It means that we do not attack those industries, or destroy them, or make it impossible for them to survive in a competi­ tive world.

RuooLPH PENNER, American Enterprise Institute: Governor, would your 5 percent budget cut apply to the Defense Department?

MR. CONNALLY: Yes, I would cut 5 percent in defense, I sure would. I am a strong supporter of a strong defense for this nation, but I don't believe that the Defense Department should be immune from such cuts. This is a case where we are trying to do two things by a 5 percent cut. First, we are trying to cut $25 billion out of the budget. We are trying to say to the world that we are going to be fiscally responsible. Secondly, we would be trying to say to American busi­ ness and American labor that before asking them to engage in volun­ tary restraints in wage and price demands, the Defense Department is going to take the first cut.

MAGDA RATAJSKI, Norfolk and Western Railway Company: You have mentioned that the main theme in your travels has been the lack of confidence, both internationally and domestically. Beyond the eco­ nomic comments you have already made, what sort of measures do you think would restore national confidence in the White House and the executive branch?

14 MR. CONNALLY: I think the President certainly started exerc1smg a high degree of apparently effective leadership in foreign policy in the Camp David summit. I think he will have to bite the bullet on such fundamental things as energy. He did not send a good energy bill to the Congress, and he ought now to admit he made a mistake. Otherwise the energy bill that we will get will be a bad bill, and that would be unfortunate. He ought to be saying that in the field of energy three sources of energy will meet the needs of this nation for the next twenty years. They are coal, nuclear power, and oil and gas. He ought to face up to the hard choices. In the field of agri­ culture, he ought to ask the Congress to develop a long-range market­ ing program in cooperation with other nations, for agricultural com­ modities., This is a vital part of the strength of America, not just at home but abroad, and we have never had an effective marketing system. And yet, 60 percent of our wheat, 55 percent of our rice, 50 percent of our soybeans, 40 percent of our cotton, 20 percent of our corn have to be sold on the export markets. We also know that if it were not for the excess productive capacity of American agriculture, there would be millions of people starving within thirty days, that 64 per­ cent of all the edible grains in the world come from the United States, and yet we have never developed a marketing system. If we ask the American farmer to produce in excess of our needs in this country, then this government, it seems to me, must have some kind of a foreign policy of marketing. That is an area in which the President should work. He certainly should move in providing incentives for the greater commitment of resources to re�arch and development. The future economic vitality of America will be built on new products and new services, on new ways to do things, on the field of science. That will be the frontier of America. Yet, at the very time when we need to maintain our lead in technology against other nations of the world, we permitted our commitment to research and development to drop from 3 percent to 2.4 percent of GNP. At the same time, the Ger­ mans have increased theirs to 2.4 percent, and the Japanese to 2.3 percent. We are going in the wrong direction, and they are going in the right direction. We need to turn it around. Part of this problem stems from the basic antibusiness bias in this country. We are permitting some ideas to gain credibility in this country that are self-destructive. This certainly is an area in which I think the President could move, without doing himself damage. He

15 would do himself great good by doing it. I don't think there is any political risk to it. An area he has already addressed himself to is the Congress. It has taken too much power over foreign policy. I think that is bad. Ultimately, it will be tragic. The President ought to continue to fight to regain authority and control over American foreign policy. Those are some of the areas that I would address myself to.

SIGMUND WAHRSEGER, Bear, Stearns, and Company of New York City: Given the condition of our basic industries-and I am not talking now about R & D, but about industries like iron and steel and ship­ building-is it reasonable to assume that we can give subsidies and support to them? How can the public be made to recognize the need to do what appears to be pro big business? That would not appear to be very appealing to most of the country.

MR. CONNALLY: We would have to talk about it, to give it high visi­ bility, and to provide the political leadership that changes the com­ plexion of public opinion. This is the whole problem. We do have a political environment that makes it almost impossible to help these basic industries in America. The only answer is to change the political environment. Instead of the President denouncing a capital gains reduction as a lagniappe, as a sop, to the rich, why doesn't he describe it for what it is? It is an encouragement, an inducement, for people to save and to invest. That is the only way to get investments in major industries in this country. We have to change the political environment. It will not be easy, but there is not much political risk to it.

HOBART TAYLOR, attorney: First, I would like to comment that the variation in rates of research expenditures is even more exaggerated than you indicated in view of the inflationary rate in the United States vis-a-vis the relative lack of inflation in Germany and Japan. What I wanted to ask you was, when you were in southern Africa, was there much discussion of the Russian penetration into the horn of Africa and its possible impact on the Persian Gulf and oil supplies? Is our government following a sufficiently energetic policy in connection with it?

MR. CONNALLY: Mr. Taylor, I don't think we are. No one knows what the root cause of some of the troubles are, but let me go back before this administration came into power. When trouble started in Angola, President Ford and Secretary

16 Kissinger advocated help and arms to our allies and our friends, or potential friends, in Angola. Some was given but, obviously, not enough. Congress stopped it. Then this administration came into office and immediately said that it would refuse to sell arms to certain countries-I believe Uruguay was one, and Ethiopia was certainly one. So those countries got arms from the Soviet Union. The Soviet Union, using the Cuban mercenaries, took control of Angola and then of Ethiopia. Those mercenaries are moving against Eritrea. The Soviet Union has floating drydocks in the entrance to the Red Sea. It has long been a dominant influence in South Yemen, where there are over 5 million potential troublemakers ready to move against Saudi Arabia. This is one of the problems with the policies that we are follow­ ing. Iran is bracketed by Iraq, which has been under some influence from the Soviets for many, many years. Now, as a result of a coup, a Soviet disciple is in power in Afghanistan. Iran is now surrounded on three sides by Communist influence, and it has many, many internal troubles. If we are not careful about our policy on human rights and majority rule, we will strike at the very heart of the two countries we cannot afford to lose-Iran and Saudi Arabia. They control the oil reserves of the world. They control the life blood of Western Europe and of the industrialized world. Few countries in the world, however, have less democracy-less one man-one vote-than those two. I said at the outset I think it is a mistake to use human rights doctrine as a weapon. It is noble to use it as an expression of faith, of belief, of basic commitment of this country. But we must be far more sophisticated and far more mature than we have been in apply­ ing such doctrines in the field of diplomacy and foreign policy.

GRACE-MARIE ARNETT, Copley News Service: Mr. Connally, I am in­ terested in your views about the sale or nonsale of technology and economic products to the Soviet Union as an instrument of foreign policy. For example, what do you think about the Dresser Industries, of Dallas, selling the Russians a complete plant for making oil drilling equipment?

MR. CONNALLY: To get down to the very basics, we live in a time when no country wants to be responsible for a nuclear holocaust, no country wants to use nuclear weapons, no country wants war of any kind. It behooves the United States, in the implementation of its

17 diplomacy and of its foreign policy, to use its economic power as we have in the past used military power. If, indeed, we are not going to use military power, then what weapons do we have other than the sheer force of words and the power of persuasion? Unfortunately, those powers are not under­ standable to most people in the world. Most people in the world are moved only by military power or economic power. So, if the world does not believe we will use military power, only economic power is left. I addressed myself to foodstuffs a moment ago. I think we should seriously consider whether or not we want to sell grains to the Soviet Union. I am a strong believer in exporting foodstuffs-I know we have to export them, but do we have to export them to the Soviet Union? Strangely enough, probably the two largest purchasers of food­ stuffs this year from the United States will be the Soviet Union and the Peoples Republic of China. I don't know how much their re­ sources are freed up by the millions of tons of foodstuffs we send them. Perhaps if we did not send them any, they would have to commit 40 percent or 45 percent of their total population to the pro­ duction of food and fiber instead of 30 or 35 percent. These are very real questions. Please don't misunderstand me­ I don't think we have the economic leverage, at this point, to turn the Soviet Union around. I simply am saying, in the broadest terms, that we ought not to permit any sale to anybody for any purpose that does not serve the interest of the United States. Our primary responsibility is to serve the interests of the United States. Beyond that, I think that, when we feed hungry people, when we send relief for earthquakes, typhoons, floods, and famine, we are serving the interests of the United States, and we are also committing a humanitarian act, a compassionate act. We should do that. But giving away the strength of America may be another matter. If other nations can get the technology of Dresser Industries or whatever elsewhere, if it is not something that we, and we alone, have, sure I would sell it to them. I would rather sell it to them than let the Germans or the French sell it to them. We denied Brazil nuclear power, and we made an enemy because the Brazilians got it anyway. They got it from Germany. We tried to stop Germany from giving it to them, but it did not do any good. Germany sold it to them, and we were the loser all over. In years past, there was a strong relation­ ship between our army and their army, our navy and their navy, our air force and their air force. There was an intelligence flow through those channels in addition to the State Department, the CIA, and

18 other counterparts-a real flow of information. That flow has almost dried up. That has all changed because the Brazilians look on us now as a nation that has no interest in them. As a consequence, they have no interest in us. And we are changing the relationship between this country and many other countries around the world, and it is a mistake.

LEw ENGEMAN, lawyer: The President, in pushing for the passage of his energy legislation, has increasingly been using the argument that passage of the bill will increase foreign confidence in the U.S. econ­ omy and, accordingly, would help the dollar, and that defeat of the bill would have the opposite effect. My questions are: Do you buy that argument, and, if you were a member of the U.S. Senate, would you vote for the present bill?

MR. CONNALLY: I doubt that I would vote for the present bill. I don't necessarily buy that argument. If he had a good bill, I would buy the argument. In the initial stages, instead of just calling for conservation of resources, he should have provided inducements to mine and use .coal, and he should have provided more research on the gasification of coal and desulfurization of coal. He should have provided induce­ ments to drill more oil and gas wells. He should have taken on the environmentalists to the extent that was necessary to build nuclear power plants. Nuclear power is here, and it will be one of the three sources that serves the needs of this nation. That is what we should be doing. If the world saw us reducing our dependence on imported oil, that would make the difference. What we say, and whether or not we pass a bad bill, would make no difference.

JAMES MILLER III, American Enterprise Institute: To return to wage and price controls, I gather you would be in favor of something like what is being discussed by the administration right now. I wonder if you have any comments on what particular targets you think are appropriate, and how you would administer such a program?

MR. CONNALLY: I am not sure I know what is being discussed by the administration right now, other than the comments made a moment ago about voluntary wage and price controls. If you will tell me what they are discussing, I will tell you whether or not I agree with it.

MR. MILLER: Well, I understand that they have in mind using some

19 leverage of the federal government with respect to producers that supply the federal government. They also have in mind a kind of "voluntary" program that would call in labor leaders and sellers of products and ask them to conform with certain suggested guidelines. I don't know the precise numbers-they are under intensive study.

MR. CONNALLY: My response to you would be basically the same response I gave a moment ago. I think any credible voluntary policy to control inflation in this country has to start with the federal gov­ ernment. Let it deny itself something. Let it reduce its spending first. Let it set the example. We have too much inflation in this country, and it is basically caused by federal spending and federal deficits. There is too much bureaucracy. There are too many regulations in the country. These are the things that people are worried about. This is what is upsetting America today. And the federal government has it within its power to start a trend away from every single one of them. Most people think, rightly or wrongly, that the biggest con­ tributing factor to inflation today is the size of the federal budget and the deficit in that budget. The administration can do something about both of those things. I see Dr. Arthur Bums here. I think it is fair to say to all of you that he is a man for whom I have not only profound respect, as an economist and a public servant, but also a great personal affection. He and I were privileged to work together during many of the days that we have been discussing. Like the present chairman of the Federal Reserve Board, he was compelled to raise interest rates to try to slow down the econ­ omy, to try to use monetary policy as a brake on inflation, and that should be done. It seems to me, the federal government finds it difficult to act as responsibly as those in the fiscal field do. And in my judgment, we cannot cure inflation in this country solely by monetary policy.

MR. MnLER: But you would be in favor of wage and price controls in addition to other things you recommended?

MR. CONNALLY: No, I wouldn't be in favor of wage and price controls.

MR. MnLER: What about the guideline type of policy?

MR. CONNALLY: Well, the guidelines are voluntary, but I would have those only in conjunction with a move by the federal government to

20 reduce its spending and to reduce taxes, and to encourage saving and encourage investments, to encourage economic vitality in the country.

MR. GoLDWIN: If Mr. Miller is right, though, that the administration is thinking of putting pressure on American companies that are suppliers to the U.S. government, at least that shows it knows how to use eco­ nomic pressure. [Laughter.]

MR. CONNALLY: Yes. Well, they know how to use economic pressure­ ! never doubted they knew how to use it. [Laughter.]

MIKE SAPPERSTEIN, Bear, Stearns, and Company: I have heard about reducing government spending now for quite a few years. I was hope­ ful that several of the people who were elected to the presidency would reduce government spending, and I saw them fail in this capacity. What makes it so difficult to reduce government spending, sir, and what can you envision doing that would have an effect on reducing government spending?

MR. CONNALLY: I think it is one of the most difficult things in the world to do. I have a very serious and a revolutionary answer to it. In the first place, any legislative body has an insatiable appetite, at any level. Therefore, all the talk about having to run government as a business couldn't be more wrong. There never should be a sur­ plus in government, because the moment a surplus appears, the legis­ lature or the spending agency will spend it, for whatever. And they can always think of new ways to spend it. My only answer is that we have to make a fundamental change. We have to change the incentives. The incentive now, in our political system, is for a man to go to Congress and stay there, and the way he stays there is to increase spending and do good things for people. Now the American people are waking up to the fact that these poli­ ticians can't do anything for them that they haven't already done to them. But the awakening is a little belated. The theory is still that legislators always have to increase spending, to do more things for more people. This is the cycle that we are in. How can we break it? We can break it by a limitation of terms-one six-year term for a president, never to be reelected; one six- or eight-year term for a U.S. senator; and two four-year terms for a member of the House. Let them serve eight years. My proposal sometimes seems the voice of only one man, except when I talk to people-then everybody in the country appears to be for it. If all these officials know they will serve only six or eight years,

21 they will not be interested in building empires over which they will not preside. And they know they will have to go back home to earn a living. They will not have their salaries indexed in Washington. They will not have the best pension system in the free world. Frankly, the problem is right at the feet of Congress. That is where the problem is. There are 317 former members of the Senate and the House today drawing pensions of more than $22,000 a year. The average amount that they contributed to the pension fund totals $26,000. That is their lifetime contribution, and they are drawing it down almost every single year. If they served in Congress for twenty years, and if they are 62 years old, they would be drawing over $40,000 a year, having con­ tributed a total of $26,000. Now, there is something wrong in this political system. And the only way I know to cure it is to break that cycle.

MR. 5APPERSTEIN: In other words, Governor, you are saying that unless we kick these people out after one term, you see no way to control government spending, because it will be impossible for any president to challenge the legislature?

MR. CONNALLY: He can't challenge it. There have been times when presidents have not spent funds; and that creates such animosity it destroys his relations with the Congress. The congressmen tell him that they appropriated this money, that it was their decision, not his. They are empowered to appropriate money in this country, while the president is empowered to execute and administer the affairs of this government in accordance with the policies Congress enacts. And, basically, their argument is right. There is one other answer that we are seeing today, but it is probably not a wise answer. Proposition 13 sets limitations on the amount of money available to politicians. If we do not get some fundamental change, such as I am suggesting, the idea embodied by Proposition 13 will sweep this country. It is on ballots, in one form or another, in, I guess, half the states of the union right now. In the next six or eight years, I think we will see a move to adopt a constitutional amendment to limit the amount of federal spending. I suspect it will be posed as a percentage of gross national product.

ALDO BECKMAN, Chicago Tribune: Concerning a limitation of terms, if you should be elected president, would you, as a matter of princi­ ple, announce that you would only serve one term?

22 MR. CONNALLY: Yes, I would be delighted to, if they give me one six-year term. [Laughter.]

MR. MASHEK: Governor, you served three terms, though, as governor of your native state, as I recall.

MR. CONNALLY: That's six years.

MR. MASHEK: Right, but you did run for reelection twice, and many people figured you could have run a fourth and fifth time and won. As I recall, one of the reasons you ran was that you had not finished your program; you wanted to go on. Don't you think an official would be shackled with lame duckism under your proposal?

MR. CONNALLY: I don't think that is any great disadvantage. There are always lame ducks. And, as you well know, Mr. Mashek, it was generally con­ ceded-though I don't want to be immodest-that I could have been elected to a fourth term as governor of the state, and no one had ever done that. But I walked away from it. I retired because I thought I had served long enough. No one ever solves all the problems. No one ever will live long enough to solve the problems. We will not reach utopia. We work, we massage, we alter, we modify, we change some of the problems we are faced with, but, when we change those, we create others. The idea that we have to keep a man in office to solve all these problems is baloney.

MICHAEL MALBIN, American Enterprise Institute: Mr. Connally, it is probably a little early to be talking about 1980, but a number of potential candidates are doing so, at least privately. How do you see the Republican race shaping up in 1980? Do you see it as another possible Ford-Reagan race? Do you see one of the new faces breaking out of the pack, and, if so, what sorts of conditions would favor what sorts of candidates? And what do you expect to be doing during the winter and spring of 1980?

MR. CONNALLY: Winter and spring of what year?

MR. MALBIN: 1980. [Laughter.]

MR. CONNALLY: Well, you are asking me to engage in the wildest kind of speculation, and I will respond to it only in this way: I do

23 not think we will see another Ford-Reagan confrontation. They both may be running, but they won't be by themselves. Will one of the young faces come forward? That depends entirely on the young faces. The mood of the country would permit it. The country is in a volatile state of mind. Anything could happen. Any­ body could catch on. Anybody could fail. It will be an extremely interesting year. I would guess there would be six or eight candidates for president, and maybe ten, so it should be an exciting year. What will I be doing? I don't know. I have deliberately avoided trying to reach a decision until after the general elections this year­ not for what they will tell me but just for the passage of time. I think it is unfair to those running for governor, for Congress, for the Senate, for local legislative races to allow the presidential campaign to be involved in the 1978 elections. It is divisive. It siphons off funds and creates diversionary interests. I have deliberately avoided even seriously thinking about it. As soon as the November election is over, I will think about it. Either I will get in, or I will get out of the race. And if I get in, I want to get in early. If I get in, I don't care who else runs. But that is a decision I have not made, so, I don't know what I will be doing in thefall and springof 1980.

ARTHUR BROIDA, American Enterprise Institute: Governor, I would like to hear you speak for a moment about an abstract question. You were closely associated with two presidents, Lyndon Johnson and Richard Nixon, whose tenure saw the collapse of confidence in the political leadership of this country and in the presidency, itself. How much resilience do you think there is in that office? Can any­ body, these days, lead this country from that office?

MR. CONNALLY: It is difficult to do that, Mr. Broida. It has to be done, I think, by sheer force of personality, to begin with, because the inherent power is not in the office. Restoring that power will not be done overnight. It is something that will require work. In the aftermath of Watergate, and of what had been perceived to be the ascendency of a strong presidency, Congress moved in the period of a weak presidency to capture-recapture, they called it­ power. I don't think they had ever lost it. It has now transgressed into areas that-particularly in areas of foreign policy, as I said a moment ago-that it should not have moved into. Foreign policy of thiscountry cannot be either devised, conceived, or administered by the Congress of the United States. Congress is a debating society, and it cannot be an effective instrumentality for the

24 day-by-day development of foreign policy-even of long-range for­ eign policy, except in the broadest sense. To reassert the powers of the presidency now will be extremely difficult. It will be done only by the force of personality of a president who wins a significant victory in the country, and who instills enough confidence in the people by his actions, both at home and abroad, so that Congress cannot resist him. It is just that simple.

MR. BROIDA: Is that the kind of presidency you think the people in this country are looking for?

MR. CONNALLY: Yes, I do. I don't think there is any question about it. If I had to say in one short sentence what the American people are looking for, I would say strong leadership. I think that is what the world is looking for. The world is looking for the United States to assert its leader­ ship. It does not require much travel around the world to realize the incredible dependency that the world feels toward the United States in terms of leadership. If the free world has a leader, it is the United States, and if we falter, or if we fail, then every nation in the world that aspires to any degree of freedom will feel that it has been cut adrift, that it has no hope of help. It is absolutely essential that the presidency be, not a dictatorial office, obviously, but a strong office, and that the president of the United States be perceived as a strong leader. To be a strong leader, he will have to be a bold leader and a courageous leader. That will probably mean that he will be a one-term leader. We live in extremely volatile times, changing times, and no man should assume that office with the idea of playing politics with it, in order to assure his own reelection. This is one of the reasons why I advocate one six-year term, because many of the problems that a president faces are long-range problems. They will not be solved in two years or four years, not in the present term of any congressman or, in many cases, in his own term. He has to take unpopular steps and make unpopular decisions in order to meet the long-term needs of the nation. He will not do it, and the Congress will not do it unless he assumes it to be incumbent on him to provide the leadership. It behooves a president of the United States to change the polit­ ical environment, and he can do it. I think he has to do it. He has to assume the burden of trying to explain to the American people how this system functions. He has to show that we cannot do what we have done, we cannot have what we have had, we cannot accomplish

25 what we have accomplished, if the federal government becomes more and more assertive, more and more domineering and dominant in the economic affairs of this nation. We have been able to do what we done through the ingenuity of individuals in the private sector. But now the whole private sector is under attack from every standpoint. If we permit it to continue for too long a period of time, we will undermine the very strength of this country. And the only person that can turn it around is not a congressman-not even the Congress, itself-but the president.

WALTERBERNS, American Enterprise Institute: Combining your answer here with your statement about the _problem of the Soviet Union and trade with the Soviet Union, and our inability to take the positions made necessary by the competition of the Japanese and the Germans, is it really true that we have to acquiesce in this situation? Isn't it possible for the president of the United States to provide the leader­ ship that would stop this whipsawing arrangement with the Germans and the Japanese, where we don't sell to them but they do sell to us?

MR. CONNALLY: Sure he has the power, and he will have to use it, absolutely.

MR. BAROODY: Governor, we are very grateful to you.

MR. CONNALLY: Thank you. [Applause.]

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AEI ASSOCIATES PROGRAM The American Enterprise Institute invites your participation in the competition of ideas through its AEI Associates Program. This program has two objectives: The first is to broaden the distribution of AEI studies, conferences, forums, and reviews, and thereby to extend public familiarity with the issues. AEI Associates receive regular information on AEI research and programs, and they can order publications and cassettes at a savings. The second objective is to increase the research activity of the American Enter­ prise Institute and the dissemination of its published materials to policy makers, the academic community, journalists, and others who help shape public at­ titudes. Your contribution, which in most cases is partly tax deductible, will help ensure that decision makers have the benefit of scholarly research on the prac­ tical options to be considered before programs are formulated. The issues studied by AEI include: • Defense Policy • Health Policy • Economic Policy • Legal Policy • Energy Policy • Political and Social Processes • Foreign Policy • Social Security and Retirement Policy • Government Regulation • Tax Policy For more information, write to: AMERICAN ENTERPRISE INSTITUTE 1150 Seventeenth Street, N. W., Washington, D.C. 20036 A Conversation with John Connally of Texas is an edited transcript of a discussion with the former secretary of the Treasury, three-time governor of Texas, and possible presidential candidate in 1980. In this wide-ranging discussion, Mr. Connally considers the causes of the present inflation and the trade imbalance, the relationship of oil im­ ports to the health of the economy, U.S. relations with southern African nations, the human rights element of U.S . foreign policy, and his own political plans and prospects. Here is a sampling of the views Mr. Connally expressed: • "In my judgment, wage and price controls will not work, never have worked, and never will work. ... To answer your question, yes, the wage and price controls imposed in 1971 were a mistake." • "Instead of the President denouncing a capital gains reduction as a lagniappe, as a sop, to the rich, why doesn't he describe it for what it is? It is an encouragement, an inducement, for people to save and to invest. That is the only way to get investments in major industries in this country." • "Any credible voluntary policy to control inflation in this coun­ try has to start with the federal government. . . . Let it reduce its spending first. Let it set the example. We have too much inflation in this country, and it is basically caused by federal spending and federal deficits."

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